SOCIAL SECURITY

News Release

The Social Security Board of Trustees today declared that the Social
Security program continues to be substantially underfinanced for
the long term, while extending the projected solvency of the trust
funds by three years.

In the 2002 Annual Report to Congress, the Trustees announced:

The projected point at which tax revenues will fall below program
costs comes in 2017 -- one year later than the estimate in last
year’s report;

The projected point at which program costs exceed tax revenues
plus interest from the trust funds comes in 2027 -- two years
later than the estimate in last year’s report;

The projected point at which the trust funds will be exhausted
comes in 2041 -- three years later than the estimate in last
year’s report;

The projected actuarial deficit of taxable payroll over the
75-year long-range period is 1.87 percent -- slightly larger
than the 1.86 percent projected in last year’s report.

"These projections suggest that we have not lost ground in
the past year," said Jo Anne Barnhart, Commissioner of Social
Security. "However, the report still projects that, once the
trust funds are exhausted, payroll tax revenues will be sufficient
to meet only 73% of Social Security benefit obligations under current
law. And projections for the late 21st century paint
an even bleaker picture.

"The message of this report is clear," Commissioner Barnhart
said. "In order to create a sound and sustainable future, long-term
trust fund deficits should be addressed in a timely way to allow
a gradual phasing in of any necessary changes, and so workers can
adjust their plans accordingly.

"The President has put forth six principles to guide our search
for a way to ensure that Social Security remains secure through
the entire 21st century. Under these principles, current
and near retirees can be assured that their benefits will not be
adversely affected; and the 153 million workers covered by Social
Security this year can be confident that retirement benefits under
the program will be reformed and made secure and the disability
and survivors benefit components will be preserved.

"I am convinced that the current period of national debate
and discussion can yield a bipartisan plan that will ensure that
Social Security will continue to play its essential role for today’s
retirees and other beneficiaries, workers, their children and grandchildren.
But, as the report issued today makes clear, we cannot postpone
our task."

Other highlights of the Trustees Report include:

The Old-Age and Survivors, and Disability Insurance Trust Funds
paid benefits of approximately $432 billion in calendar year
2001;

There were 46 million beneficiaries on the rolls at the end
of 2001;

Income to the combined Trust Funds amounted to $602 billion
in 2001 and expenditures were $439 billion, increasing the assets
of the combined funds by $163 billion to $1.21 trillion at the
end of 2001;

The cost of $3.7 billion to administer the program continues
to be a very low 0.6 percent of total income;

Interest earned on the invested assets of the combined Trust
Funds was $72.9 billion in 2001.

Based upon the most recent experience and updated methodologies,
the Trustees made several changes in assumptions from last year’s
report. The shorter-term outlook was improved primarily because
of higher assumed productivity growth and revenue from taxes paid
on Social Security income. The longer-term deterioration in outlook
resulted from the passage of another year, a lower death rate assumption
and projected higher benefits on average. The combination means
that at the end of the 75-year period the program is in a significantly
worse position than projected in last year’s report.

The Board of Trustees is comprised of six members. Four serve by
virtue of their positions with the federal government: Paul H. O’Neill,
Secretary of the Treasury and Managing Trustee; Jo Anne Barnhart,
Commissioner of Social Security; Tommy G. Thompson, Secretary of
Health and Human Services; and Elaine L. Chao, Secretary of Labor.
The other two members, appointed by the President and confirmed
by the Senate, are John L. Palmer and Thomas R. Saving.